In last few months lot of venture funds have emerged to back early stage startups. Despite this, the base of the startup funding pyramid is shrinking and this could severely impact growth of startup ecosystem in India.

If we look at the figures stated by Tracxn, a startup analytics firm, the number of angel and seed investments made in the first half of 2017 (January to June) is down to 260, indicating a drastic drop from 419 in the first half of 2016. Whereas, Seed funding has seen a steep decline from 278 to 152.

Even though the numbers of deals in seed and angel round are down, the deal sizes in these round have increased. The total angel and seed funding has risen to $155 million in the first half of 2017, from $123 million in the year-ago period.

The report further states, the total funding in 2017 at $5.1 billion is more than double that in 2016, at $2 billion and ecosystem get this number because of the two big funding rounds of $1.4 billion each in Flipkart and Paytm.

Earlier in May 2017, News Corp, had released Startup Deal Report Q1 CY2017. According to this report, investors prefers late stage funding. The report states, angel and seed investments fell both in volume and value terms with deal volumes reduced to half with 120 deals in Q1 CY2017 in comparison to 245 deals in the same period last year. Whereas Series A funding declined 65% in deal value on a Y-o-Y basis and Series B funding value improved 22% in the FY Q1 compared to the same period last year, despite deal numbers being lower by 16%.

This indicates that investors are wisely investing in startups that is their focus is on fewer ventures which they think have a better chance of survival.

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